Memorandum D10-18-5

Locator Code: 861A

Ottawa, February 28, 1997

In Brief

SUBJECT

CUSTOMS BONDED WAREHOUSES TRQ AGRICULTURAL GOODS

1. When tariff rate quotas (TRQs) were implemented in the agricultural sector on January 1, 1995, and August 1, 1995, (first-come, first-served), new administrative policies were published in Memoranda D10-18-1, Tariff Rate Quotas, and D10-18-6, First-Come, First-Served Agricultural Tariff Rate Quotas . These policies indicated that while an import permit is required for TRQ products which appear on the Import Control List, the permit is not necessary to obtain release of the goods. Instead, the type of permit used to import commercial shipments of these goods is a factor used in determining the tariff classification of the goods at the time of final accounting and determines whether the goods are classified under a within access commitment tariff item (specific import permit or General Import Permit [GIP] No. 20 for wheat, barley, wheat products, and barley products) or under an over access commitment tariff item (GIP No. 100).

2. It was necessary to alter pre-release customs procedures to administer the agricultural TRQs. Further changes to bonded warehouse procedures are also required. For TRQ goods, these realigned warehouse procedures will focus attention on the permit at the time of ex-warehousing rather than, as previously, only at the time the goods are put into warehouse.

3. Changes in bonded warehouse procedures are necessary to accommodate transactions by large meat brokers that store TRQ goods in a bonded warehouse and sell the warehoused goods to Canadian food processors. These new procedures will also facilitate TRQ administration where an importer obtains a permit for goods while they are in the warehouse.

4. The procedures in the attached Memorandum apply only to the bonded warehousing of TRQ goods and should be read in conjunction with the warehouse regulations and guidelines in Memoranda D4-1-0, Customs Bonded Warehouse Regulations, and D4-1-2, Customs Bonded Warehouses, the accounting procedures in Memorandum D17-1-0, Accounting for Imported Goods and Payment of Duties Regulations, and the documentation requirements in Memorandum D17-1-1, Documentation Requirements for Commercial Shipments.

Memorandum D10-18-5

Locator Code: 861A

Ottawa, February 28, 1997

SUBJECT

CUSTOMS BONDED WAREHOUSES
TRQ AGRICULTURAL GOODS

This memorandumsets out the regulations respecting the transfer of ownership of goods in a bonded warehouse and the regulations exempting imports of tariff rate quota (TRQ) beef and veal from permit requirements at the time of entry into a bonded warehouse. It also provides departmental guidelines and general information for the bonded warehousing of agricultural TRQ goods included on the Import Control List established under the Export and Import Permits Act, and should be read in conjunction with the guidelines and procedures described in Memoranda D10-18-1, Tariff Rate Quotas, and D10-18-6, First-Come, First-Served Agricultural Tariff Rate Quotas.

TABLE OF CONTENTS

Regulations

• Regulations Respecting Customs Bonded Warehouses
• Regulations Respecting an Exemption From the Operation of Section 14 of the Export and Import
  Permits Act for Certain Beef and Veal Imports

Guidelines and General Information

• Import Permit Requirements
• In-Warehousing
• Transfer of Ownership of TRQ Goods in a Bonded Warehouse
• TRQ Goods Re-Exported or Used as Ships' Stores
• Change in Tariff Classification of TRQ Goods While in a Bonded Warehouse
• Bonded Warehousing of TRQ Beef and Veal of Heading Nos. 02.01 and 02.02
• First-Come, First-Served TRQs
• General Information

Regulations

REGULATIONS RESPECTING CUSTOMS
BONDED WAREHOUSES

Transfer and Removal of Goods

21. Where there is a transfer of ownership of goods stored in a bonded warehouse, the importer or owner of the goods shall submit a transfer document in the prescribed form to an officer at the customs office where the goods were described under subsection 19(2) of the Customs Act .

22. Where the importer or owner of goods stored in a bonded warehouse wants the goods removed from the bonded warehouse in smaller units than those described under subsection 19(2) of the Customs Act, the importer or owner shall submit to the chief officer of customs

REGULATIONS RESPECTING AN EXEMPTION FROM THE OPERATION OF SECTION 14 OF THE EXPORT AND IMPORT PERMITS ACT FOR CERTAIN BEEF AND VEAL IMPORTS

Short Title

1. These Regulations may be cited as the Exemption Regulations (Beef and Veal Imports).

Interpretation

2. In these Regulations,

"Act" means the Export and Import Permits Act ; (Loi)

"bonded warehouse" has the same meaning as in subsection 2(1) of the Customs Act ; (entrepôt de stockage)

"release" has the same meaning as in subsection 2(1) of the Customs Act. (dédouanement)

General

3. Any person who is a resident of Canada and who imports into Canada any of the goods set out in items 114 to 116 of the Import Control List without an import permit issued pursuant to subsection 8.3(1) of the Act is exempt from the operation of section 14 of the Act in respect of that importation where the person

---

GUIDELINES AND GENERAL INFORMATION

1. The guidelines and general information in this document relate only to agricultural TRQ goods and are not intended to replace the general bonded warehousing guidelines in Memoranda D4-1-0, Customs Bonded Warehouse Regulations, and D4-1-2, Customs Bonded Warehouses, or the documentation requirements in Memorandum D17-1-1, Documentation Requirements for Commercial Shipments . The information and instructions contained herein focus on the entry and tariff classification requirements of TRQ goods that are put into a bonded warehouse immediately on entering Canada in accordance with the Customs Act and the regulations made pursuant to that Act. These guidelines will ensure that, should the required import permits be obtained while the TRQ goods are in warehouse, the goods will be classified under a within access commitment (WAC) tariff item and will be subject to a substantially lower rate of customs duty than if classified under the corresponding over access commitment (OAC) tariff item.

2. Information and guidelines are also provided on the Exemption Regulations (Beef and Veal Imports) made under the Export and Import Permits Act (EIPA). Because of the manner in which beef and veal are imported and marketed in Canada, special exemption regulations and procedures have been created to address permit requirements for these goods when placed in a bonded warehouse.

Import Permit Requirements

3. In order for TRQ goods that are described on the Import Control List (ICL) to be imported into Canada, an import permit is required. An importer may import the goods under authority of either a specific import permit obtained from the Department of Foreign Affairs and International Trade (DFAIT) or a General Import Permit (GIP). Specific permits are issued to importers with a quota allocation or, in the case of certain commodities, such as margarine, to any resident of Canada who applies for an import permit prior to the overall quota being filled. These permits allow TRQ goods to be classified under a WAC tariff item. On the other hand, GIP No. 100 allows importation of TRQ goods under the higher duty-rated OAC tariff items. Whether TRQ goods are released for immediate domestic consumption or are placed in a bonded warehouse, a permit is required to import the goods. Specific permits should be obtained from DFAIT prior to importation.

In-Warehousing

4. Importers are to declare the correct WAC or OAC tariff classification of TRQ goods on the in-warehouse type 10 accounting document, Form B3, Canada Customs Coding Form, or CADEX type 10 entry.

5. One of the factors in determining the tariff classification of the goods declared at the time of warehousing is the type of permit the importer has when importing and warehousing the goods. A specific import permit allows the goods to be classified under a WAC tariff item and the number of the permit must be entered in the Special Authority field of the Form B3 (Field 26) or CADEX entry. Except in the case of TRQ beef and veal of heading No. 02.01 or 02.02 (see paragraphs 12 to 18), importers who do not have a specific import permit at the time of warehousing are to certify on the accounting document or CADEX entry that the goods are being imported under the authority of GIP No. 100. This general import permit may be used by any resident of Canada without application being made to DFAIT. Where the importer warehouses the TRQ goods under authority of GIP No. 100, the goods are classified under the OAC tariff item on the type 10 transaction.

Transfer of Ownership of TRQ Goods in a Bonded Warehouse

6. When the ownership of an entire shipment of warehoused TRQ goods is transferred while the goods are in warehouse, the change of title to the imported goods must be indicated using a type 30 Transfer of Ownership transaction. Where a specific import permit was obtained before the goods were entered into warehouse, the permit number is input in the Special Authority field and the goods are classified under the WAC tariff item on the type 30 transaction. The shipment of WAC TRQ goods is then ex-warehoused using a type 20 ex-warehouse transaction, with the previous transaction and line numbers and the original import permit number input on the Form B3 (Fields 24, 25, and 26) or CADEX entry (KI30 and KI40 records). Where the goods were warehoused without a specific import permit and ownership is transferred, the goods are classified under the OAC tariff item on both the type 30 and type 20 transactions.

7. In the event a shipment of WAC TRQ goods (a specific import permit was issued before in-warehousing) is split up while in warehouse for sale to multiple purchasers, each individual sale is indicated on a type 30 transaction. The type 30 transactions and corresponding type 20 ex-warehouse transactions are completed as outlined in paragraph 6 above.

8. Importers who obtain a hard copy permit, who submit it with the type 10 transaction, and who use a manual Form B3 type 20 to ex-warehouse the goods, are also required to submit a copy of the permit with the ex-warehouse transaction. Where the importer ex-warehouses these WAC TRQ goods by CADEX transmission, the hard copy specific import permit is submitted with the other release documentation at the time of in-warehousing.

9. With the national implementation of EXCAPS (Foreign Affairs/Customs Automated Permit System), the use of hard copy permits is declining. Where permits are obtained electronically and permit information is available in EXCAPS, the permit number is provided with the various warehouse transactions as indicated above.

TRQ Goods Re-Exported or Used as Ships' Stores

10. In the case of TRQ goods re-exported or used as ships' stores, the tariff classification of the goods on the type 21 (Ex-Warehouse, Export) or type 22 (Ex-Warehouse, Ships Stores) transaction is the same as the tariff classification on the type 10, or type 30 transaction if there was a transfer of ownership. Should TRQ goods that are imported under the authority of a specific import permit be subsequently exported, DFAIT will not credit the quota allocation of the importer for the quantity of goods re-exported.

Change in Tariff Classification of TRQ Goods While in a Bonded Warehouse

11. Where TRQ goods have been entered into warehouse on a type 10 transaction under an OAC tariff classification, and a specific import permit is obtained when the goods are in warehouse, tariff classification may be changed to the WAC classification on any subsequent transactions, and the number of the recently acquired permit is input on these transactions. A type 13 re-warehouse transaction has to be completed to show the change in tariff classification.

Bonded Warehousing of TRQ Beef and Veal of Heading Nos. 02.01 and 02.02

12. Because the ICL lists beef and veal of heading Nos. 02.01 and 02.02 as originating in non-NAFTA countries, beef and veal of these headings which originate in a NAFTA country do not require permits, and no permits will be issued on these goods by DFAIT. Therefore, all beef and veal of heading Nos. 02.01 and 02.02 for which a NAFTA tariff treatment is claimed are imported, warehoused, and ex-warehoused under the appropriate OAC tariff item, which attracts the same rate of duty under the United States Tariff and the Mexico Tariff as the WAC tariff item for the same goods.

13. The TRQ or non-NAFTA beef and veal are generally imported by large meat brokers who themselves are not holders of quota, and who sell the goods to processors that have received a quota allocation and specific permit.

14. The Exemption Regulations (Beef and Veal Imports) under the EIPA were made to address the special circumstances of importers of TRQ beef and veal of heading Nos. 02.01 and 02.02, and do not apply to any other TRQ products. The main benefit of the exemption from section 14 of the EIPA is that this non-NAFTA beef and veal may be warehoused without a permit, i.e., without a specific import permit and without reference to GIP No. 100.

15. The Exemption Regulations (Beef and Veal Imports) allow importers to store non-NAFTA beef and veal in a bonded warehouse without a permit pending either

16. Where a specific import permit has been issued to the original importer (meat broker, etc.) prior to importation of the non-NAFTA beef and veal, the procedures in paragraphs 6 through 8 are followed.

17. In all other cases, the type 10 accounting document or CADEX type 10 entry indicates the OAC tariff classification, but the importer does not have to certify that the goods are being imported under authority of GIP No. 100. If the ownership of the beef or veal is transferred while the goods are in warehouse to a purchaser who holds a specific import permit, the tariff classification of the goods is changed to the WAC tariff item and type 13, type 30, and type 20 transactions are completed. The specific import permit issued to the purchaser of the beef and veal will, subject to compliance with its terms and conditions, be considered by Revenue Canada to be a valid import permit for the purposes of subsection 10(2) of the Customs Tariff .

18. Where the beef or veal is transferred to a purchaser who does not have a specific import permit, or is re-warehoused or ex-warehoused by the original importer without a specific import permit number input in the Special Authority field, the OAC tariff classification for the goods is used. At the time of release from the bonded warehouse of the beef or veal by a person without a specific import permit, the person completing the type 20 ex-warehouse transaction has to certify that the goods are imported under authority of GIP No. 100.

First-Come, First-Served TRQs

19. The first-come, first-served (FCFS) TRQs are wheat, barley, wheat products, and barley products. They may be placed into a bonded warehouse and classified under an appropriate WAC tariff item until the quota limit is reached and access to GIP No. 20 is withdrawn. Once the quota is filled, these goods can only be put into warehouse under an OAC tariff item.

20. Revenue Canada tracks the quantity of FCFS goods being imported and counts warehoused goods at the time they are placed into warehouse.

21. Should a FCFS quota limit be reached when goods of that category are in warehouse, the goods can be ex-warehoused using the WAC tariff item under which they were entered by making reference to GIP No. 20 in the Special Authority field.

General Information

22. For more information regarding the bonded warehousing of TRQ goods, please contact:

References

ISSUING OFFICE -

Tariff Programs Division

Trade Administration Branch

LEGISLATIVE REFERENCES -

Customs Act

Customs Tariff

Export and Import Permits Act

Regulations Respecting Customs Bonded Warehouses

Regulations Respecting an Exemption From the

Operation of Section 14 of the Export and Import

Permits Act for Certain Beef and Veal Imports

HEADQUARTERS FILE -

4572-13-1

SUPERSEDED MEMORANDA "D" -

N/A

OTHER REFERENCES -

D4-1-0, D4-1-2, D10-18-1, D10-18-6, D17-1-0,

D17-1-1